Online investing

Pringle, There is no expected return. It depends on what you invest in and how well it does. Riskier stocks have greater risk/reward potential. Safer stocks will give you more safety and less potential return. One measure frequently used as a benchmark is the S&P 500, which is a basket of stocks of some of the largest U.S. companies. Historically, it has averaged about a 10 percent return per year (stock appreciation plus dividends), however you have to keep in mind that built into that average have been years at a time in which the S&P 500 lost money and years at a time in which it was up way more than 10 percent. Investing in stocks can be volatile. The goal for most investors is to get themselves close to that 10 percent annualized over the long term. But you need a long enough time frame to have a reasonable expectation of that.

The first thing to do is figure out your goals. I can't give comprehensive financial planning advice like this, but just to help you start researching on your own: you need to take into account how much you have to invest, what the money is for (retirement, kids college, etc.?), your age, and how much time you have to meet the dollar amount you are hoping to grow your money to.

Using myself as an example, I am aggressive. When I started investing in my early 20s, I figured I had a 40 year time frame. That allowed me to invest very aggressively. I spend a lot of time learning about the companies I invest in. Again, you will need to give yourself an education to figure out the things to look for. Two sectors I personally concentrate mostly on, are health care (with a particular emphasis on biotechnology stocks) and broad technology (such as Cisco Systems, which I have owned since 1992, and almost singlehandedly bought my home for me). Health care is a good long term bet because of demographics--aging population, consuming more and more health care, drugs and services. I have also dabbled a bit in Chinese stocks the last few years, with more money going recently into a closed-end fund (too much to explain what a closed end fund is) that Morgan Stanley started that invests in stocks only available on the Chinese exchange. Again, this investment is based on the demographics of China and the growth of the Chinese economy heading forward.

I can't stress the importance of diversification. You don't want to own just two stocks. You want your money spread around, so that your winners balance out your dogs. It takes some of the volatility out. For example, I never gamble on a single biotech stock, even though there have been some I have really believed in more than others based on products they had in trials. I invest in a basket of biotech stocks that I like. Most of them won't do much, but one or two will come out of Phase III trials with something approved by the FDA and do very well. Then, on top of the biotech stocks, I will own other types of stocks that give me access to other sectors. It balances out my risk.

If you only have a bit to invest, and can't diversify appropriately, an open-end mutual fund is the way to go. You buy shares in the fund (the price is the net asset value, which is a reflection of the underlying stocks in the portfolio) and a portfolio manager manages a basket of stocks in the fund. It gives you exposure to a diverse portfolio with a little bit of money. Read up about funds, the different types, etc. Morningstar.com is a good place to start. Two of the most important things to pay attention to in a mutual fund are the load and the expense ratio. Not all funds charge a load, but it is a commission up front. Any money you pay up front takes away from your future return. Also, every mutual fund has expenses--things like the cost of buying and selling the stocks, paying the portfolio manager, profit for the fund company. Lower expense ratios mean you are starting less in the hole. It's generally good policy to look for funds with low expense ratios of about 1 percent or less. In effect, that means before the fund even returns anything, you are down 1 percent, in just expenses. Some funds have exorbitant ration--I've seen numbers as high as 9 and 10 percent. It's something not enough investors look at before investing. Vanguard is one company that has good, conservative, no-load, low expense funds. There are others, as well.

I hope that is a start for you to do some research on your own.

Luggy, I invest entirely online. I started with Datek, years and years ago, which was bought by Ameritrade, which was bought TD Waterhouse. The company is now TD Ameritrade, and I am very happy with them. It is $9.99 per equity trade. You'll probably never trade options, but they are pretty cheap compared to the other online brokers--commission depends on the size of the trade.